Murphy & Murphy Properties in Southern California
This is an incredible time to be a salesperson. The average price of a single-family home in Fallbrook has increased $ 182,500 since January, equaling the average June sales price of $ 827,500. The median price of a single family home is from
$ 729,283 to $ 858,153, an increase of $ 128,850. Over 2/3 of all home sales are sold above the list price. Such numbers remind me of 2005 and 2006, but a lot is different from then.
Many people tell us that they are waiting for the market to adjust in anticipation of a collapse reminiscent of the big short of 2008. I don’t have a crystal ball, but economists who are much smarter than me don’t expect similar drama
Attitude. Why, you might ask? The simple answer is another S-word, lack.
Adjustments don’t just happen. Something has to happen that causes an adjustment. Buying real estate is completely different this time. Lenders do not make it easy for a buyer to qualify for a loan. Buyers must have strong incomes, excellent credit ratings, and a property valuation. VA and FHA loan limits are well below the median or average price of a home, so buyers must qualify according to traditional guidelines.
Traditional policies require a higher credit rating so the risk to the lender is lower. With traditional financing, a buyer may be able to bring in additional money if the appraisal is below the purchase price. With FHA, the buyer cannot. In 2005 we used to joke that anyone who can fog up a mirror can get a loan. In 2021, exactly the opposite will be the case.
The other thing that has changed is the lack of “piggyback” credit in today’s transactions. This is the case when there are two loans involved in the purchase of the property. The first loan is 80% of the purchase price. The second loan is for
20% of the purchase price. This type of loan allows the buyer not to have to pay PMI (private mortgage insurance) but with a higher interest rate on the 20% loan.
When a buyer uses a piggyback loan, the buyer has no risk, no “teeth” involved. When times get tough, leaving doesn’t cost the buyer anything in real money. It costs them the damage it does to their credit, but in time it can be healed. In 2005, piggyback loans were common. But they are not common in 2020 and 2021. None of the offers we’ve seen in the past 12 months suggested this type of funding.
The general control comes from the gatekeepers of the money; Banks, mortgage brokers, and government regulators require that loan-to-value ratios, debt-to-income ratios, and income records meet guidelines before a mortgage is approved.
Properties receive several offers, many of them in cash or with a significant amount of money. Many offers come without any random evaluation. We even see that the lender waives the rating on purchases with large ones
Down payments of 40% or more. Even the FHA or VA buyers who successfully purchase homes are well qualified and have strong, stable jobs and incomes. 2021 is a completely different market with completely different strategies than 2005.
Another major difference between 2005 and our current market is the offer. Builders built over until 2005 and 2006. National Association of Realtors chief economist Lawrence Yun recently stated in Realtor magazine that he believed America had a housing surplus of 2.1 million by 2006. After the crash, underproduction led to the current housing shortage.
He goes on to say that the deficit was 2 million homes by 2015 and 4.8 million homes by the end of 2020. Because of this housing shortage, there is no risk of home prices falling sharply. It will take at least a few years to remedy this massive deficiency. In the meantime, Mr. Yun goes on to say that he expects the average home price to rise 9% this year and an additional 3% in 2022.
The pace we saw in the first half of this year appears to be easing towards the beginning of the third quarter as supply improves and affordability issues persist. And a price increase of only 3% is worth mentioning as it’s a 9% decrease, but it is certainly not a dramatic adjustment. This information can be an incentive to sell your home this year, but even the first half of next year is expected to be a strong market.
I want to close with one final observation and comment on any sellers or potential sellers. I review a daily report that shows all the new offerings coming on the market in Fallbrook and Bonsall. I am sad and shocked at the number of people out
Territory listing agents and the commission offered to the buyer’s agents.
First, an agent outside of the area is of no use to you. If you think that it doesn’t matter who lists your home because the market is so hot, you are unfortunately mistaken. When I compare the selling prices that local agents get for similar properties, the local agents get by far much higher prices for their sellers. Why?
Because the local agent knows and explains the intrinsic value of living in Fallbrook / Bonsall. An agent outside of the area only sells a house, it’s a number for them. It’s not a community, it’s not a lifestyle, it’s a number. Which brings me to the second part. Seasoned brokers are working harder than ever to help their sellers and buyers find common ground in the intense market. Sellers are making a boatload of well-earned equity for their homes. But in the hands of a discount broker, not only do the brokers fall short, but also the sellers.
Ask yourself that. If a realtor is willing to cut their fee to keep your business going, how much more willing are they to get you to cut the value of your home just to get the sale? Just my thoughts and humble opinion.
Kim Murphy can be contacted at [email protected] or 760-415-9292 or 130 N Main Avenue in Fallbrook. Her broker license is # 01229921 and she serves on the board of directors of the California Association of Realtors.